Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd and another application

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 19 January 2011
• Neutral Citation: [2011] SGCA 1
• Citation: [2011] SGCA 1
• Docket Number: Civil Appeal No 160 of 2009 and Summons No 697 of 2010
• Published date: 24 January 2011
• Hearing Date: 13 April 2010,06 April 2010
• Plaintiff Counsel: Francis Xavier SC, Mohammed Reza and Low Yi Yang (Rajah & Tann LLP)
• Date: 19 January 2011
• Defendant Counsel: Tan Liam Beng, Tan Kon Yeng Eugene and Soh Chun York (Drew & Napier LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: commercial practicability,When requirement to take reasonable steps arises,Event beyond the control of affected party,Interpretation of force majeure clause,Meaning of word "disrupted",Contract

Andrew Phang Boon Leong JA (delivering the judgment of the court): Introduction

This is yet another case in a series of cases arising from the Indonesian sand ban of 2007 (“the Sand Ban”). Not surprisingly, the crux of the present appeal turns on the interpretation of a force majeure clause. More generally, however, it is important to note at the outset that, save where the relevant contractual terms concerned in the case at hand are identical to the corresponding terms in a previous decision, previous decisions would be of limited assistance. This is however, subject to the situation where general points of legal principle are involved. It follows that the court must pay particular regard to the specific terms and the relevant context in question in arriving at its decision.

This is an appeal by the Appellant against the decision of the trial judge (“the Judge”) in Precise Development Pte Ltd v Holcim (Singapore) Pte Ltd [2010] 1 SLR 1083 (“the Judgment”). The present appeal centres, in the main, on a specific term in the contract between the parties as well as on a few crucial pieces of correspondence between the parties (all of which will be set out in more detail at the appropriate junctures in the present judgment).

Briefly stated, the Appellant and the Respondent had entered into a contract (“the Contract”) for the supply of ready-mixed concrete (“RMC”) from the former to the latter. The Contract was entered into before the Sand Ban came into effect on or about 6 February 2007.¹

The Sand Ban created a shortage of sand and aggregates (which constituted materials required for the manufacture of RMC). The Appellant’s position was that, as a consequence of the Sand Ban, it could no longer supply RMC at pre-Sand Ban prices. Citing the Sand Ban, the Appellant informed the Respondent that it could supply RMC only if the Respondent was willing to pay a price higher than the contract price. The Respondent’s case was that the Appellant had breached the Contract by evincing an intention not to supply concrete at the prices stipulated in the contract. The Respondent sued the Appellant for breach of contract and asked for damages in the sum of $5,074,411.43. The Appellant raised three defences, one of which was based on the force majeure clause found in the Contract (the two remaining defences will be dealt with below). The force majeure clause was contained in cl 3 of the Contract (“cl 3”), and provided as follows:

The Purchaser must provide sufficient advance notice in confirming each order. The Supplier shall be under no obligation to supply the concrete if the said supply has been disrupted by virtue of inclement weather, strikes, labour disputes, machinery breakdowns, riots, and shortage of material[, acts] of God or any other factors arising through circumstances beyond the control of the Supplier. [emphasis added]

The Judge rejected all three defences and held that the Appellant, in refusing to supply RMC to the Respondent at the contract price, was in breach of the Contract. Interlocutory judgment was awarded in favour of the Respondent, with damages for the Respondent to be assessed by the Registrar.

The Appellant has not pursued the defence relating to an alleged discharge of the Contract by mutual agreement in the present appeal (see also below at [26]). We find the Judge’s reasoning as well as decision in relation to the issue of termination pursuant to cl 10 of the Contract (“cl 10”) to be persuasive and correct (see also below at [33]–[34]). In the circumstances, the only issue before this court centres on whether or not cl 3 (the force majeure clause) applies in order to afford the Appellant a defence against the Respondent’s claim.

It should, however, also be noted that the Appellant also sought, in the present appeal, to amend its defence to include an alternative defence that the Contract had been frustrated. If the application is allowed, this would constitute a second issue before this court. However, we are not persuaded that the Appellant ought to be permitted to amend its defence, not least because (as the Respondent argues) new evidence would be required (our detailed reasons on this issue are set out below at [102]–[105]). We turn then to the substantive issue in this appeal (centring on the interpretation of cl 3). However, before proceeding to do so, we set out the relevant factual (including documentary) matrix.

Factual background Introduction

Turning to the relevant factual background (which is crucial to the interpretation as well as application of cl 3), the Appellant entered into the Contract with the Respondent on 10 November 2006 for the supply of RMC for a warehouse project.² The Respondent is the main contractor for the project. The Appellant is in the business of manufacturing and supplying RMC to construction companies, and it uses concreting sand and aggregates as source materials to manufacture RMC.

The Contract consists of a quotation dated 10 November 2006 and a page of Terms and Conditions. The Contract required the Appellant to supply 90,000 cubic metres (+/- 15%) of concrete to the Respondent for the project. Amongst the grades of concrete included in the Contract was Grade 30, for which the Appellant quoted a price of $65 per cubic metre. In the quotation dated 10 November 2006, paragraph 3 states as follows:

All prices fixed till 31st Dec 2007.

The salient clauses in the Terms and Conditions of the Contract included cl 3 (set out above at [4]), and cl 10 and cl 15 which read as follows:

Clause 10

The supplier reserves the right to terminate the contract giving one month’s written notice to the Purchaser stating the reasons for the termination.

Clause 15

For concrete order that exceed 100[cu m], two day[s] advance booking is required. All bookings are to be accepted by the Supplier. In no event shall the Supplier be liable for any liquidated damages arising from any cause whatsoever loss of profits consequential or otherwise.

[emphasis added]

Announcement of the Sand Ban

The Indonesian government suddenly announced on or about 23 January 2007³ that it would impose a Sand Ban from 6 February 2007. This had an immediate impact on the availability and prices of sand. The Appellant wrote to the Respondent on 26 January 2007 to inform it of the Sand Ban, and that this would lead to a shortage of materials to manufacture RMC.⁴ The Appellant stated that it was meeting the Building & Construction Authority (“the BCA”) to discuss alternative options for the supply of sand. The Appellant stated that it might have to cease the supply of concrete and advised the Respondent to seek alternative avenues of supply.

Subsequently, in a Circular dated 1 February 2007,⁵ the BCA announced that it would release sand from its stockpiles, priced at $25 per tonne. However, only main contractors such as the Respondent would have access to the BCA’s sand stockpiles, and under which system the BCA would supply sand directly to the main contractors (such as the Respondent) for “onward delivery” to RMC suppliers (such as the Appellant). It is therefore common ground that the Appellant had no access to the BCA’s stockpiles. The same Circular stated that the amount of concrete, grade of concrete, and concreting sand required for the February weekly demand would have to be certified by the Professional Engineer of the project. It is pertinent to note that there is no mention of manufactured sand in this Circular.

The Appellant’s Letter and Quotation of 1 February 2007

The Appellant informed the Respondent by way of a letter dated 1 February 2007 that: ⁶

the sudden announcement by Indonesia of the ban on sand, soil and topsoil exports to Singapore resulted in an immediate scarcity of materials and escalating prices that were totally beyond [the Appellant’s] control.

The letter also mentioned a meeting with the Minister of National Development on 30 January 2007, where the Minister had apparently stated that the Sand Ban was an abnormal situation that was beyond anyone’s control. The Appellant stated that it had been notified by the BCA that sand would be released from the BCA’s stockpile from 1 February 2007 and that there should be concreting sand available albeit at higher prices.⁷ The Appellant informed the Respondent in this letter that it was unable to supply RMC at the prices agreed upon in the Contract (“the contracted prices”) due to the shortage of sand caused by the Sand Ban. In addition, the letter of 1 February 2007 stated that:

In light of all the factors mentioned above that is beyond our control, we have no alternative but to revise our concrete prices. Please find attached our quotation for the supply of concrete effective 1 February 2007 for your consideration.

The quotation referred to in this letter and attached (“the 1 February Quotation”)⁸ quoted prices of RMC which were 30% to 50% higher than the contracted prices. The Respondent, however, did not agree to the prices stated in the 1 February Quotation, and hence did not sign the quotation.

Events leading up to the implementation of the Sand Ban

On 5 February 2007, a day before the Sand Ban came into effect, one of the Appellant’s sand suppliers, Huat Shua Company Pte Ltd (“Huat Shua”), informed the Appellant that it was unable to supply sand to the Appellant, and that the supply agreement between Huat Shua and the Appellant had been terminated under its force majeure clause with immediate effect.⁹ It is noteworthy that the Appellant’s other sand supplier, Bibright Shipping Pte Ltd (“Bibright”), had informed the Appellant on 2 February 2007 that Bibright’s sand stockpile had been taken over by the BCA, and that Bibright could only release their concreting sand supply based on the BCA’s approval. Bibright also ceased its obligation to supply sand to the Appellant based on the force majeure clause in their supply agreement.¹⁰

By a...